The Rapscallion Company’s stock is selling for $43.75

jagguarpaw January 18, 2017 0 Comments

Question: The Rapscallion Company’s stock is selling for $43.75

The Rapscallion Company’s stock is selling for $43.75. Dave Jones has done some research on the firm and its industry, and he thinks it will pay dividends of $5 next year and $7 the following year. After those two years, Dave thinks its market price will peak at $50. His strategy is to buy now, hold for the two years, and then sell at the peak price. If Dave is confident about his financial projections but requires a return of 25% before investing in stocks like Rapscallion, should he invest in this opportunity?